Report 2018-108 Recommendation 12 Responses

Report 2018-108: California High‑Speed Rail Authority: Its Flawed Decision Making and Poor Contract Management Have Contributed to Billions in Cost Overruns and Delays in the System's Construction (Release Date: November 2018)

Recommendation #12 To: High-Speed Rail Authority, California

To ensure that the oversight firms' spending is reasonable, the Authority should develop a formal process by May 2019 for tracking any out-of-scope work that the oversight firms perform. To reduce the likelihood that its contracts with the oversight firms run out of funds prematurely as a result of this additional work, the Authority should also develop a formal process for amending the oversight firms' contracts contemporaneously to change orders that significantly extend the timelines or increase the scope of work of the construction contracts that oversight firms oversee.

6-Month Agency Response

The Authority's PCM Manual has been revised and finalized to include the PCM's responsibility to monitor potential out-of-scope work prior to starting any such work. The analysis for any amendment shall be in accordance with Contract Change Management Procedure, Appendix D (PROC-CADM-07). Resulting amendments will comply with the requirements of the Program Delivery Committee and the Business Oversight Committee.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

The Authority's new procedures in this area direct the PCMs to monitor the construction contractors for disputes or other changes that may create out-of-scope work for the PCM to oversee. If it identifies such work, the PCM must report to the Authority within 60 days regarding the need for a contract amendment.

60-Day Agency Response

The Authority revised the PCM Manual to reflect their responsibility to identify, manage and request amendments for out-of-scope work. This revision assigns the Authority PCM contract managers' responsibility for tracking and identifying any potential out-of-scope work and the necessity to amend contracts at each PCM work plan revision and approval. The draft revision is being circulated for comment and finalization.

The Business Oversight Committee is providing oversight of the necessity and business case to amend PCM contracts. The Program Delivery Committee is focusing on key construction milestone timely achievement and decision-points, including when, or if, PCM contracts require amendment.

California State Auditor's Assessment of 60-Day Status: Partially Implemented

The Authority provided draft language for revisions to its contract manual for oversight firms that summarizes the process for identifying the impacts to contracts for out-of-scope work and corresponding requests for amendments. As part of our future review of this recommendation's implementation status, we will be looking for procedures related to the timeliness of this process, which is a key element of the recommendation. Additionally, the Authority states that the Business Oversight Committee (committee) is providing oversight of amendments for these contracts. However, as we discuss in the audit report, although the committee has been in place since September 2017, we identified concerns with an oversight contract amendment approved by the committee in March 2018. It is not entirely clear from the Authority's response specifically how the committee's current role is related to the Authority's efforts to fully implement this recommendation. Therefore, in its future responses, it is important for the Authority to specify the role of the committee in fully implementing the recommendation and to provide documentation demonstrating its role in effective implementation.

All Recommendations in 2018-108

Agency responses received are posted verbatim.